A Contingent Liability Should Be Disclosed in a Note to the Financial

question 68

Multiple Choice

A contingent liability should be disclosed in a note to the financial statements rather than being recorded if:

• A)The likelihood of a loss is remote.
• B)The incurrence of a loss is reasonably possible.
• C)The incurrence of a loss is probable.
• D)The likelihood of a loss is eighty percent.

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Definitions:

Simplified Method

An IRS-approved strategy for calculating the taxable portion of annuity payments, primarily used to simplify tax reporting.

Taxable Income

The portion of one's income that is subject to taxation after all deductions, exemptions, and adjustments have been applied.

Single Life Annuity

An annuity that provides payments for the lifetime of the annuitant only, ceasing upon their death.

Annuity Contract

A financial product issued by an insurance company that offers fixed or variable payments to an individual, typically beginning at retirement.